[CLUE-Admin] CLUE Trade Name & Checking Account --> problems!

[Jeffery Cann]

Greetings,

At Tuesday's meeting, someone asked if we considered the tax implications of
getting a CLUE checking account.  We have not, but I spoke with my CPA today.  

I asked about registration of CLUE with the Colorado Department of Revenue (via
Trade Name) - whether we should register as an association (or a partnership). 
He explained that it is common for non-profit associations (like CLUE -- even
those who do not elect 501(c)(3) status) to register their association via a
Trade Name.

We then spoke about the upcoming auction.  He explained that because we are not
a 501(c)(3) and will be accepting donations from users that are not
tax-deductable, we would be liable for tax payment on all of the proceeds of
the auction.  We are in effect, acting like a broker.  So, it is actually a
business!  Although we are not trying to make a profit, we still would owe
taxes because we do not have the 501(c)(3) tax exemption.

I had planned to get the CLUE trade name validated tomorrow morning.  We needed
it to open a commercial bank account in order to accept checks for the CLUE
auction.  After speaking with Mark we have two options:

1.  He recommended that we run the auction like a garage sale --> cash only and
personal checks (written to me).  Under the current tax law, individuals are
allowed tax free income gains via garage sales.  This would allow us to avoid
paying taxes on the proceeds.

2.  Continue as planned with the CLUE checking account but then bear the tax
burden.  I believe we would have to file taxes as a group, but we certainly
would owe for the proceeds of the auction.

Mark (my CPA) recommends #1 and I agree, based on his recommendation.  So, I
think we will have to advertise that the auction is cash only.  If folks want
to write checks, they would have to write them to me personally.  This is an
acceptable way to accept checks without the tax liability caused by opening a
CLUE account.

Jeff

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